Buildings insurance for a rental property is more involved than for your own home, and for leasehold flats it can be unclear who insures what. Getting it wrong can leave you uninsured or paying twice. This guide explains buildings insurance for landlords and leasehold flats, what it covers, and who arranges it.
Why landlords need specialist buildings cover
As with any landlord cover, ordinary home buildings insurance generally will not respond on a let property, so landlords need a specialist landlord buildings policy. It covers the structure of the property against the usual insured events, but on terms suited to letting, including the higher risks of a tenanted property. Using a domestic policy on a rental is a common and costly mistake, as a claim is likely to be refused, as our guide to landlord insurance explains.
What buildings cover protects
Landlord buildings insurance covers the physical structure, the walls, roof, floors and ceilings, along with permanent fixtures, against events such as fire, flood, storm, escape of water from burst pipes, subsidence, vandalism and malicious damage. It usually also covers the landlord's fixtures and fittings. If an insured event damages the building, the policy pays to repair or rebuild it. The exact list of covered events and any conditions vary, so reading the policy is important.
Rebuild cost, not market value
The sum insured for buildings cover is based on the rebuild cost, what it would cost to rebuild the property from scratch, not its market or sale value. For flats and unusual buildings the rebuild cost can differ markedly from the price, so it is worth establishing it properly, using an appropriate assessment. Under-insuring, where the sum insured is below the true rebuild cost, can lead to a reduced payout, so accuracy protects you at claim time.
Loss of rent within buildings cover
Landlord buildings policies often include loss of rent cover, which pays your rental income if the property becomes uninhabitable after an insured event while repairs are carried out. The cover usually has a limit, such as a capped amount or a number of months, known as the indemnity period, often 12, 24 or 36 months. Check this, as a long repair after a major event like a fire could otherwise leave you out of pocket for income.
Property owners' liability
Buildings cover for landlords usually includes property owners' liability, protecting you if someone is injured or their property damaged because of a defect in your building, and you are held responsible. This is essential, since landlords carry legal responsibility for the condition of their property, and a serious claim can be very large. The liability limit is typically several million pounds, and it is worth ensuring it is adequate, as our guide to landlord insurance notes.
Leasehold flats: who insures the building?
For leasehold flats, the building is very often insured by the freeholder or the management company, not the individual leaseholder, with the cost shared among leaseholders through the service charge. This means that as a leaseholder landlord, you may not need to arrange your own buildings insurance, because it is already in place for the whole building. Always confirm this, so you neither leave a gap nor pay twice for cover you already have.
What a leaseholder landlord still needs
Even where the freeholder insures the building, a leaseholder who lets their flat still typically needs other cover: contents for anything they provide, property owners' liability for their own letting, and possibly rent guarantee and legal expenses. So the building may be covered, but the landlord-specific risks are not, unless you arrange them. Checking exactly what the freeholder's policy covers, and filling the gaps, ensures you are properly protected as a letting leaseholder.
Check the freeholder's cover
If you are a leaseholder landlord, ask for details of the freeholder's buildings policy, including the sum insured, the cover and the excess, and check it is adequate and up to date. If you have a mortgage, your lender may want evidence of this cover. Knowing what the building policy does and does not include lets you arrange any additional cover you need, rather than assuming everything is taken care of.
Freehold houses: you insure the building
If you let a freehold house, you are responsible for insuring the building yourself, with a landlord buildings policy. There is no freeholder to arrange it, so the duty falls to you, and a mortgage lender will require it. This is the more straightforward case: you take out specialist landlord buildings cover, based on the rebuild cost, with property owners' liability and ideally loss of rent, and keep it in force throughout the let.
Excess and what you would pay
Like any insurance, a landlord buildings policy carries an excess, the amount you pay towards a claim. Some events, such as subsidence or escape of water, often carry a higher excess than the standard one. Check the excesses before you buy, and make sure they are at a level you could afford, since a high excess on a likely claim type can leave you paying a large share. Knowing the excesses avoids a surprise at claim time.
Trace and access cover
A useful feature to look for is trace and access cover, which pays for the cost of finding and getting to the source of a problem such as a hidden water leak, including lifting floors or removing parts of the structure, and making good afterwards. Without it, the cost of locating a leak can fall to you even if the resulting damage is covered. For a let property, where leaks may go unnoticed, this cover can be valuable.
Keeping the rebuild value updated
Building costs change over time, so a rebuild figure set years ago may now be too low, leaving you under-insured. Review the sum insured periodically, and after any work that changes the property, such as an extension or conversion. Many policies adjust for inflation, but it is still worth checking the figure is realistic. An accurate, up-to-date rebuild value is the surest way to ensure a major claim, such as after a fire, is paid in full.
The simplest rule for a leaseholder landlord is to confirm in writing what the freeholder's policy covers before assuming the building is taken care of, then arrange only the contents, liability and income cover you still need yourself.
In short
Landlords need specialist buildings cover, since domestic policies are usually void on a let property. It covers the structure against insured events, based on the rebuild cost, and often includes loss of rent and property owners' liability. For leasehold flats, the freeholder usually insures the building through the service charge, so a leaseholder landlord should confirm this and arrange only the cover they still need. For a freehold house, you insure the building yourself.
Where to get help and next steps
Read our guide to landlord insurance for the full picture, and rent guarantee and tenant default insurance to protect your income. This is general information, not financial or legal advice.
